Cigars, Cigarillos and Smoking Tobacco in New Zealand

2021 DEVELOPMENTS

Fine cut tobacco posts steepest volume decline as overall demand continues to fall

With excise-driven price hikes and health concerns prompting more smokers to quit or cut down, all categories within cigars, cigarillos and smoking tobacco continued to contract in retail volume terms in 2021. The negative impact of these factors was compounded by rising inflation and increased health awareness resulting from the pandemic, hence in all cases rates of volume decline were steeper than in 2020.

Cigarillos shows most resilient performance in retail volume terms

Cigarillos contracted at a slower pace than other categories in retail volume terms in 2021. Its comparatively resilient performance in this regard was largely explained by the fact that unit prices for these products are still substantially lower than those for cigars.

Rate of volume decline in pipe tobacco more stable than in other categories

While pipe tobacco remained a niche area in New Zealand in 2021, the acceleration in the rate at which retail volume sales declined as compared to 2020 was much more modest than those witnessed in other categories. This was mainly because traditional pipe tobacco almost exclusively appeals to older people – primarily older men – who have smoked some form of tobacco for most of their lives.

PROSPECTS AND OPPORTUNITIES

Demand for all product types expected to decline throughout the forecast period

All categories within cigars, cigarillos and smoking tobacco are projected to see volume sales decline throughout the forecast period. Demand for these product types will continue to fall as rising health-consciousness and excise tax hikes lead more smokers to quit, cut down or switch to e-vapour and heated tobacco products, which are perceived to be less harmful and can also be more economical.

Fine cut tobacco set to remain the worst performing category in retail volume terms

Fine cut tobacco is expected to post the steepest decline in retail volume sales over the forecast period. Given that this product type is consumed more regularly than others, the category will face a higher degree of exposure as health concerns, rising unit prices and anticipated regulatory changes motivate more smokers to quit or cut down.

Illicit trade likely to increase following enactment of new anti-smoking legislation

Together with further excise tax hikes, the New Zealand government’s plans to significantly reduce the availability and nicotine content of all smoked tobacco products are expected to result in higher levels of illicit trade in cigars, cigarillos and smoking tobacco over the forecast period. While smuggling and informal sales are unlikely to increase to the same extent as in the case of cigarettes, local experts such as ASH chair Professor Robert Beaglehole warn the effectiveness of new legislative measures designed to curb smoking prevalence will be hampered if they are applied too hastily and not backed by a major push to encourage consumers to switch to vaping as a less harmful alternative.